Forget the fads — your media efficiency ratio (MER) is one of the most important marketing KPIs for 2020 and beyond. Learn more about it here. — Markacy
2020 is not only a new year; it’s also a new decade. And while most marketing teams are looking ahead and starting to plan for this year’s campaigns, strategies, and tactics, it’s also a good time to regroup on what really impacts your bottom line.
What do we mean by this, exactly?
First, it’s worth noting that about every 10 years the way marketers and brands communicate with end consumers changes.
The 90s introduced us to eCommerce, the 2000s were the advent of Google and Facebook Ads, and the last 10 years have been the proliferation of big data, influencer marketing, podcasts, cross-channel content, experiential marketing, and OTT/Connected-TV.
For start-ups in today’s business arena, a new ad platform pops up nearly every week so it’s a full-time job to determine which ad platforms have legitimate scale vs. just flavor of the week appeal.
And while it’s perfectly logical to continuously evaluate new channels, the lens in which startups evaluate platform success is often too narrow.
Despite the fact that being a pioneer in the marketing space requires you to capitalize on new tactics and platforms, there’s an essential part of the equation that’s often ignored: your “Media Efficiency Ratio.”
Defining and Calculating Media Efficiency Ratio
Media Efficiency Ratio (MER) = Total Revenue / Total Paid Media Spend
Simple enough, yet we see so many companies ignore this marketing KPI in favor of vanity metrics on the latest social media platform — or worse, wasting time over-analyzing small peaks and valleys in platform level ROAS (return on ad spend) and CAC (customer acquisition cost) when the health of the business is better assessed through cross-channel metrics.
ROAS & CAC metrics are constantly in your face, so we get it. But paid channels are always changing, and there’s no way around that. Moreover, platforms like Facebook and Google are extremely competitive private networks, and the CPMs are getting increasingly more expensive.
Media spend should be evaluated in related to the broader performance of the brand and the factors that lead to sustained growth (e.g., do we have product/market fit; is our creative & brand messaging resonating with our target market; are we investing in new acquisition channels that can scale) — along with the understanding that channels are not mutually exclusive.
An effective email marketing campaign or sustained lift in organic brand awareness will almost certainly boost Facebook performance (and vice versa).
While evaluating individual marketing channels on their own merits is important for implementing tactical tweaks, it must be coupled with a more strategic assessment of growth.
Thinking of Paid As Part of the Puzzle
There are a few ways we recommend assessing MER. During the early days of a brand’s launch, we would expect overall revenue — across all channels and platforms — to improve relative to total media spend. This would be the sign of a healthy company. Put bluntly, consumer interest in the brand is outpacing the cost of acquiring consumers.
However, this trend is not sustainable forever. As brands scale media spend, they reach a point where MER settles into a normalized baseline. While this threshold varies from brand to brand and new tiers can be reached over time, it ultimately becomes more important to evaluate new marketing channels and campaigns in the context of a healthy MER range (i.e. one in which estimated revenue exceeds the all-in acquisition cost of acquiring said revenue) rather than the pursuit of indefinitely increasing MER.
When MER is the overarching goal, brands can truly take advantage of a cross-channel strategy that balances paid with earned and organic media.
Facebook, Google, and other paid platforms are thought of as a percent of total revenue and avenues to drive customer acquisition within acceptable CAC ranges. A higher than desired CAC on a given paid media channel, for example, is often OK if overall cross-channel CAC is still profitable.
And brands can also focus on retaining and nurturing their customers, which is equally if not more important for future business growth — think email campaigns, strategic PR initiatives, and results-driven content marketing.
Brands with a simple and crisp message, who engage customers across paid and non-paid channels will see break-out growth due to achieving lower overall acquisition costs and better retention rates.
How Markacy Can Help
By focusing on cross-channel MER as your most important KPI for marketing, you will always grow faster. It will give your brand the opportunity to see through a wider scope and increase revenue through a multi-channel strategy. Whether that’s paid or organic media, MER allows brands to grow more sustainably and take a holistic approach to growth marketing.
Here at Markacy, we’ve helped dozens of consumer brands expand their thinking to evaluate performance on a more holistic level and as a result, grow revenue and marketing efficiency in the process.
We’re an expert level team with decades of experience across strategy consulting, performance marketing, media, web development, and creative production.
Want to better apply MER at your company? Contact us to learn more about working with Markacy and how we can help you scale, grow, and make 2020 your best year yet.
